The We Company’s subsidiary WeWork is in considering cutting the amount of valuation it is looking for in an initial public offering (IPO) to a bit above $20 billion, an amount which is less than even half of the $47 billion amount it had been valued at in a private funding round in January this year, reported Reuters, citing people familiar with the matter.
The We Company’s considerations show how the increasing uncertainty of investors about the WeWork’s strategy to make profits and strong hold of co-founder Adam Neumann on its governing body, are impacting the outcome company has been expecting from the IPO.
A sudden drop of that extent in the We Company’s valuation could also prove to be hurting the expectations of other Silicon Valley unicorns, a term referring startups having a valuation of more than $1 billion, which are also planning an IPO.
Other IPO’s high valued companies occurred this year, such as stock market listings of ride hailing companies Lyft Inc and Uber Technologies Inc, have remained under performing in trading afterwards largely because of having no strong strategy to become profitable which shook the investor’s trust.
In May, at the time of IPO, Uber saw its worth valued at $82.4 billion whereas in 2018, bankers had told the company that its valuation is around $120 billion. However, Uber is still in a better position than where the We Company is standing because in its most recent private fundraising round, Uber succeeded to achieve a valuation of $76 billion.
The We Company has yet to launch road shows to formally seek what the investors are thinking about its worth and the company is likely to be starting that on Monday, one of the sources told Reuters.
WeWork’s increasing losses, lack of having concrete plan to achieve profitability and concerns over ability of its business model to survive in a slowing down economy have made its IPO unconvincing for investors and analysts.